So long, safety net

From August 2007 until June 2015, Cynthia Gussert worked as an office manager and secretary for Springhetti Landscaping and Lawn Care in Neenah, answering phones, paying bills and doing other office tasks.

She liked the job, but during the winter months, work ground to a halt and the owner was forced to lay off Gussert, along with most of his employees. Gussert — like thousands of employees laid off seasonally around the state — would file for unemployment benefits to help pay her bills until work picked up again.

During those months, Gussert would assist the company’s owner, Dan Springhetti — who attended the same church as her — by writing checks to his snow plowers and keeping the books.

It never amounted to more than an hour or two of work in a week. She wasn’t paid for the work until months later, so she didn’t claim it when filing for benefits. The pay for this work was so small that, even if she had reported it, it would not have reduced her benefits.

Gussert kept filing for unemployment during these winter months until December 2014, when the state’s Department of Workforce Development sent her a notice accusing her of fraudulently collecting benefits. All told, the department said that Gussert owed more than $20,000, not including fines that could be as high as 40 percent. She was one of 11 people with the company that the state, after a two-year investigation, accused of conspiring with their employer to defraud taxpayers.

Gussert was terrified. “I was a single mom with two kids at home that made $13 an hour,” she says. “I couldn’t think about paying that back; I live paycheck to paycheck, basically.”

She was afraid of more than just crippling debt. “If you don’t pay it back, you could end up in jail.”

Gussert later appealed and won her case. But she is among a growing number of people in Wisconsin who find themselves scrutinized by the state for the unemployment benefits they receive.

In December 2015, the state departments of Justice and Workforce Development announced they were cracking down on unemployment fraud. “It’s shameful to see this safety net, intended to help those going through a period of financial difficulty and vulnerability, ripped off by fraudulent unemployment insurance claims,” Attorney General Brad Schimel said in a press release. “Those who take advantage of the system and steal our hard-earned tax dollars should be held accountable and prosecuted for their misconduct.”

Worker advocates say that this crackdown is increasingly going after people like Gussert, who find themselves before a judge, facing fines and even criminal charges for honest mistakes or even the mistakes of state workers.

Victor Forberger, an attorney who represented Gussert, specializes in unemployment issues and keeps a blog monitoring the state’s new efforts. He says in its crackdown on fraud, the Department of Workforce Development seems to want to prevent anyone from getting benefits.

“They’re not trying to stop mistakes; they’re trying to make it worse.”

In 1932, Wisconsin became the first state in the country to pass an unemployment insurance program. It took four years for the fund to begin paying benefits. On Aug. 17, 1936, Madison resident Neils B. Ruud was issued the first unemployment check, for $15. By then the United States had passed its own unemployment insurance program — modeled after Wisconsin’s and operated in conjunction with individual state programs — as part of the Social Security Act of 1935.

In Wisconsin, employers pay different unemployment taxes. There’s a federal tax to cover administrative costs, which is essentially .6 percent. The state charges businesses two rates: a “basic tax,” to cover benefits if any of its employees are laid off, and a “solvency tax,” which covers benefits should an employer go out of business.

“A lot of people think it’s a tax on the employees, but that’s not true,” says Jen Bizzotto, a UW-Madison law student who volunteers with the Unemployment Appeals Clinic, which provides free legal aid to workers. “A lot of people think the state is paying it, but that’s not true. It’s the employer that’s paying it.”

Each employer pays state taxes on a sliding scale, depending on how big its payroll is, the number of people it has laid off recently and how large the reserve fund is. This tax can be as high as 12 percent of its payroll, for seasonal industries with high turnover, like construction, or as low as zero, for employers with little turnover and a high fund balance.

“Like any insurance premium, when someone files a claim, your premium goes up,” Bizzotto says. “We call that the employer’s unemployment tax rate. So the more people you have drawing, the higher your tax rate goes.”

Benefits are calculated based on what someone earned in the previous four fiscal quarters. For those who had more than one job, multiple employers could end up covering the benefits. The most someone can get in Wisconsin is $370 a week for 26 weeks.

Not every out-of-work person is eligible to collect. People laid off because of downsizing can but those fired for misconduct — for example, showing up drunk or stealing from the register — cannot. But some employees who are fired for poor performance or who quit for good cause can collect.

“It always depends, that’s the lawyerly answer,” Bizzotto says. The state has long carved out exceptions for when employees who quit or are fired can receive benefits.

But in the 2013-15 budget, Gov. Scott Walker and the Legislature created a new category — substantial fault — for when people can be fired and not collect benefits. And it eliminated eight of 17 exceptions when an employee who quits can collect benefits.

It used to be that if a person quit a job in order to relocate with a spouse, he or she could receive benefits. The same was true if a worker had to quit because he or she reached a company’s compulsory retirement age. People in these situations can no longer collect unemployment.

Also, if someone has more than one job and quits one of them, they are now ineligible to collect unemployment for the next year if they’re laid off from another job.

Says Bizzotto: “You’re penalizing people who work more than one job, and it undermines the entire system of unemployment.”

But even if workers do qualify for unemployment, some are finding the system doesn’t always provide the amount they are due.

Keyon Davis was contacted by the state after tripping up on a confusing question on the phone filing system: “It seemed like they were trying to make me seem like I was a criminal.”

Keyon Davis loves his job at TruGreen in Monona where he has worked since April 2015.

“My job is to fill up all the lawn trucks and residential trucks and make sure they have what they need,” he says. “I like how I can go at my own pace.”

When he was laid off in November 2015, he started collecting unemployment. Davis found the weekly filing process — where people call into an automated phone system or log into a website — confusing.

Uncertainty about one question — “Were you able to work full-time and available for full-time work?” — led to his being charged with thousands of dollars in fines. Davis had a part-time job at Ella’s Deli. Because he thought he needed to be available for full-time work if he were to find it, as part of his work search requirements, he was not accepting more hours at Ella’s.

“The problem was I was answering ‘yes’ and then it came out differently, because Ella’s was saying, ‘He’s limiting his own work,’” he says. “On my end, I was able and available. But on the end of Ella’s I was basically telling them I wasn’t available.”

A few weeks after he’d been receiving benefits, he realized he’d been incorrectly answering the question. He immediately called the state unemployment office.

“I wanted to make it clear I didn’t intentionally hide anything from them,” Davis remembers. “I don’t know what went on on their end, but it seems nobody actually did anything to fix the information because it still sat there as an error.”

About six weeks later, he got a letter saying he owed more than $2,000. Davis was interviewed by several staff from the Department of Workforce Development. He grew frustrated trying to explain what happened.

“It seemed like they were trying to make me seem like I was a criminal,” he remembers. “And that’s not who I am. I gave them all the information that they needed, and they still insisted on trying to make me out to be a bad guy.”

The Legislature in fact made that the default approach toward the unemployed, according to attorney Forberger. In a 2015 law, the state changed what it means to “conceal” income while receiving unemployment benefits. Under the new law, the state no longer has to “prove that a claimant had an intent or design to receive benefits to which the claimant knows he or she was not entitled.”

Now, honest mistakes can lead to fines and criminal charges, Forberger says.

Tyler Tichenor, a DWD spokesperson, counters that the change was made “to make the definition clearer for claimants so they could better understand what they need to do to file a claim accurately.”

John Dipko, another department spokesperson, says the state is making a concerted effort to crack down on fraud and that referrals for prosecution began increasing even before the definition change.

“The number of referrals have gone up,” Dipko says. “We’ve been much more aggressive in referring the most egregious cases of fraud for consideration for possible prosecution.

The result of this crackdown, the department argues, is that the number of people defrauding the state has dropped. According to the department, the state lost more than $20 million through concealment in 2014, a figure that fell to $8.6 million last year.

However, a December 2014 report by the Legislative Audit Bureau found that only 9.5 percent of the overpayments between 2011 and 2014 was the result of people intentionally trying to defraud the state. The rest were due to unintentional mistakes or department errors.

Tichenor says that the state has an appeals process for applicants when mistakes happen. “The bottom line is our UI staff is highly trained, professional and committed to ensure benefits are paid to eligible claimants,” he says. “We ascribe to the philosophy of ‘when in doubt, check it out,’ not ‘when it doubt, pay it out.’”

After the state accused Jacqueline Ingram of owing more than $18,000 in unemployment benefits, she feared she’d be arrested and lose her children. “I’m waiting for them to come to my house.”

Jacqueline Ingram was also confused by system. Ingram works at the Boys and Girls Club, driving a van to help kids get from school to the center or to field trips.

But there are periods when programming lags, during which Ingram has collected unemployment. Like a lot of claimants, she stumbled with this question: “During the week, did you work or did you receive sick pay, bonus pay or commission?”

Her confusion eventually led to an $18,000 fine. Bizzotto, who represented her, points out that the question is particularly confusing when you hear it on the state’s automated phone system for making claims.

“It’s a compound question and most people hear the commission, sick, bonus pay and think, ‘no, I didn’t earn any of that,’ so they’ll press no,” she says.

Bizzotto says administrative law judges and the Labor and Industry Review Commission (or LIRC, which hears unemployment appeals) have complained about the question and asked it to be simplified. “[The DWD has] been saying for over two years now that they’ve been going to change this question,” she says. “I had a hearing in early January, and it still hadn’t changed.”

Dipko and Tichenor say that the department has changed the question in the online system, breaking it out into multiple parts. But the phone system — which is in the process of being phased out — is more complicated to tweak.

“It’s a 1990s-era phone system that is being retired as usage is being amped up on our online system,” Dipko says. “The majority of claimants are filing online now.”

Ingram was terrified about what might happen if she couldn’t pay back the money the state said she owed.

“I got a second job, I was panicking thinking about going to jail, getting taken away from my kids,” she says. “Because at the end of the letter, it said ‘at a later date, we might press criminal charges.’ So, I’m waiting for them to come to my house.”

With the help of Bizzotto, Ingram appealed her case and had the amount she owed reduced to about $3,000. But the threat of criminal charges is not an empty one.

Last August, the Justice Department took a 32-year-old Milwaukee man to court for concealing benefits.

The man — who requested his name not be published — works as a construction carpenter. In 2014, the Department of Workforce Development sent him a letter saying that he’d concealed income and owed the state more than $6,000. He had two years to pay the money back and did so in about a year, the man says.

Nevertheless, the Justice Department last year filed felony charges against him. Because the Milwaukee County district attorney wouldn’t prosecute the case, the Justice Department filed the charges in Dane County Court before Judge Ellen Berz.

The man — who had no criminal record — traveled to Madison for five hearings. He eventually accepted a plea and pleaded guilty to a misdemeanor charge. Although he avoided jail and probation, he now has a record.

At his Aug. 26, 2016, hearing, Berz was both confused and exasperated by the case, asking the state’s attorney, Devra Ayala: “If he paid [the money] back before you charged it, why did you charge it if the whole point of charging it was to get the money back?”

Ayala responded: “That is a question that I have asked, and I do not have an answer.”

Berz then noted, “Clearly the Attorney General’s office does not have enough work to do on real crime, but they have to search out offenses to charge when everything’s been repaid and the person has shown remorse. Wow. Maybe the Attorney General’s office shouldn’t be funded as well as it is because...they’re obviously searching for prosecutions that experienced prosecutors locally deem not appropriate to charge.”

Tichenor, the DWD spokesperson, says that prosecutors make the decision whether to charge cases like these with information provided by DWD. “We do the legwork on our end to make sure we’re referring cases that an assistant attorney general or a district attorney would possibly take up,” he says. “It’s ultimately up to them whether they’re going to prosecute the case.”

Changes to the unemployment system have made it harder for Jon Hanauer to keep his best workers. “These are employees we’re investing in and want to keep.”

Joe Hanauer has a hard time finding qualified people to work for his Madison-based company, Landscape Architecture, which provides a variety of residential landscaping. It can be particularly tough to find people for his snow plowing service. It’s also challenging to find people with a commercial driver’s license. When Hanauer finds skilled employees, he pays them well and contributes to their retirement plans. “These are employees we’re investing in and want to keep.”

But Wisconsin’s crackdown on unemployment benefits is making that tougher. In the past, workers who were laid off from seasonal work — like those who work in construction, landscaping or tourism jobs — didn’t have to do weekly job searches in order to receive benefits.

It’s not that Hanauer’s workers — he has eight — mind doing odd jobs in the off-season. But if they find a job that they must quit in the spring when their main employment starts up, they won’t be able to file for benefits the following winter, because they will have quit a job in the past 12 months. And if they keep that job, Hanauer will have lost a skilled worker.

Hanauer has been lucky enough to keep his most skilled employers, but did lose two less experienced ones last year because of the new law. Another employee struggled through the winter without filing. “I don’t know how he did it,” Hanauer says.

A Nov. 17 public hearing — held at locations around the state — was filled with employers like Hanauer who had similar stories about how the unemployment insurance changes are affecting business and economic development. Hanauer says it’s also a public safety issue. If his trained employees are forced to take other work, they won’t be available during snowstorms.

“What if on Saturday, before Christmas we get a big snowstorm, and half our lots can’t get plowed,” he says. “That’s a huge economic burden on the retail world.”

“When this law was written, we had a really high unemployment rate; right now we don’t,” he adds. “I think 4 percent is considered full employment. Last numbers I saw, Dane County was under 3 percent. We have full employment. Unemployment is not an issue here. What is an issue is finding employees and being able to keep them.”

Using data from the U.S. Department of Labor, Forberger says he has proof that Wisconsin is denying more people unemployment benefits.

In a blog post from last August, he details how the state used to reject about 60 percent of all initial claims because it didn’t believe that applicants qualified. In early 2014, that percentage jumped to 77 percent and has stayed there.

One of the ways the state has done this is by making the process much more complicated, increasing the number of questions applicants have to answer each week in order to get benefits, requiring applicants to document at least four job searches per week and requiring applicants to attend job search seminars.

“You have to jump through all these different hoops,” he says. “And if you don’t jump through all these different hoops, you get denied benefits.”

The state is also aggressively moving to get rid of one obstacle in its crackdown on unemployment fraud: the Labor and Industry Review Commission. The commission is an independent agency that reviews decisions of administrative law judges regarding unemployment, worker’s comp and equal rights. Its website states: “The commission’s decisions provide consistency, stability, and integrity to the programs for the employers, employees, insurers, and citizens of the State of Wisconsin.”

Forberger notes that the members of the commission “aren’t a bunch of communists. This is a very pro-employer group.”

Nevertheless, the commission has been routinely ruling against DWD in its unemployment fraud cases. In the 2017-19 budget, Gov. Scott Walker has proposed getting rid of the LIRC, writing it would “Remove an unnecessary layer of government and save $3,200,000.” Forberger says that most of the fees that support LIRC come from the federal government, with only about $265,000 in state tax revenue going to the commission.

Forberger believes the crackdown has another purpose: to drive down unemployment claims so much that there’s no point in collecting unemployment taxes. “If no one can collect unemployment benefits, why should employers pay unemployment taxes?” he asks.

In his blog, Forberger explains it this way: “Unemployment claims and benefits are at record lows in the state because the state is making it difficult to impossible for claimants to receive benefits and charging the few who collect unemployment benefits with unemployment concealment. Essentially, employers are paying unemployment taxes for a benefit almost no one is using. Pretty soon, folks will start calling for eliminating the unemployment system entirely, as who wants to pay a tax that does nothing?”

If that happens, he tells Isthmus: “We’d be the state that creates unemployment insurance and also ends it.”

This article has been updated to include a comment about LIRC's budget.